The escalation of the tariff war triggers turmoil in global markets, with the VIX index soaring to historical highs.

In 2025, the global trade situation deteriorated sharply. The Trump administration announced a tariff of at least 10% on goods from the majority of countries and implemented higher rates on about 60 countries with significant trade deficits. This move triggered market panic worldwide, mainly due to the following reasons:

1. Increased corporate costs and declining profit expectations
2. The global supply chain is severely disrupted, and economic uncertainty is increasing.
3. It may trigger retaliatory tariffs from other countries, expanding the risk of trade wars.

In this environment, the trend of investor behavior is:

• Reduce the allocation of risky assets, such as stocks and cryptocurrencies.
• Increase the allocation of hedging assets, such as gold, US dollars, and Japanese yen
• The expectation of increased market volatility has led to a sharp rise in the VIX index.

The chain reaction caused by the tariff increase has led to a spread of panic in the market. The VIX index (also known as the "fear index") soared to 60 on April 7, reaching a historic high. Similar levels have only been seen during August 2024 and the COVID-19 pandemic in 2020.

VIX Index Analysis

The VIX index is calculated based on the prices of S&P 500 index options to reflect the expected volatility in the market over the next 30 days, and is considered an important indicator of market uncertainty and panic.

The higher the VIX index, the stronger the market's expectation of future volatility and the stronger the panic sentiment; conversely, it indicates that the market is relatively calm and confidence is higher. Generally speaking:

• Below 15-20: The market is relatively calm.
• Above 25: The market starts to show obvious panic
• Above 35: Market is extremely fearful
• Above 50: Extreme crisis events (such as financial crises or pandemic outbreaks)

By observing the changes in VIX, investors can gain insights into the strength of current market risk aversion sentiment, serving as a reference for adjusting investment strategies.

High Volatility Panic Zone: VIX ≥ 30

When the VIX index rises above 30, it usually indicates that the market is in a state of extreme fear or panic. This situation is often accompanied by a sharp decline in the stock market, but historical data shows that the market often rebounds after extreme fear.

Between 2018 and 2024, there have been about a dozen events where the VIX closing price rose above 30 for the first time, including the volatility storm in February 2018, the year-end sell-off in December 2018, the pandemic panic in February-March 2020, the retail trading frenzy at the beginning of 2021, and the interest rate hikes and geopolitical conflicts at the beginning of 2022.

Statistics show that in the 7 days following these panic events, the S&P 500 index averaged an increase of about 1.4%, with approximately a 73% probability of rising. This indicates that when the VIX surges above 30, the stock market generally experiences a technical rebound in the short term.

Bitcoin tends to have a strong rebound after extreme panic. Statistics estimate that the average 7-day increase in BTC is around 10%, with a win rate of about 75-80%. For example, in February 2022 when the VIX broke above 30 due to geopolitical crises, Bitcoin surged over 20% in the following week, demonstrating a rebound phenomenon similar to the decline of risk-aversion sentiment in the stock market.

Extreme Panic Peak: VIX ≥ 40

During the period from 2018 to 2024, extreme cases of VIX ≥ 40 are very rare, occurring only on February 5, 2018, and February 28, 2020. In March 2020, the VIX even surged to a record 82 points.

Due to the extremely small sample size, the statistical results are only for reference. After that event in 2020, the S&P 500 index slightly recovered by about 0.6% within 7 days, while Bitcoin recovered by about 7%.

When the VIX reaches historical extremes above 40, it often indicates that the market's extreme panic selling pressure is nearing its peak, and the opportunity for a short-term rebound is relatively high. From a long-term perspective, these points in time are usually relative lows.

Low Volatility Range: VIX ≤ 15

When the VIX index falls below 15, it usually indicates that the market is in a relatively calm state. Investor sentiment is relatively optimistic, and the demand for hedging is low. However, the subsequent trends at this time are not as clearly consistent as when the VIX is high.

During the period from 2018 to 2024, the VIX has repeatedly fallen below 15, such as after the strong rebound in the stock market in early 2019, during the market stability period at the end of 2019, during the stock market upward phase in mid-2021, and around mid-2023.

In the 7 days following an event point with extremely low VIX, the average return of the S&P 500 index is about 0.8%, with a win rate of approximately 60-75%. Overall, in a low volatility environment, stock indices tend to maintain a gradual upward trend or slight fluctuations.

The price movement of Bitcoin during periods of low VIX lacks a clear direction. Statistics show that its 7-day average increase is only about 2%, with a winning rate of approximately 60%. The predictive reference value of low VIX for the subsequent price movement of Bitcoin is not significant and must be considered in conjunction with the funding sentiment and cycle analysis of the crypto market itself.

Conclusion: Risks and Opportunities Coexist

The current VIX is at a high of 50, reflecting extreme market concerns over US tariff policies. However, historical experience shows that the market often breeds opportunities in despair.

During the pandemic in 2020, the VIX broke through 80, while the S&P 500 index was around 2300 points. Even after the recent panic sell-off, the S&P 500 index is still around 5000 points, with an increase of over 100% in five years. During the same period, Bitcoin surged from 4800 dollars to a historical high of 110,000 dollars, an increase of nearly 25 times.

Every significant market adjustment is accompanied by asset repricing and capital reallocation. In this uncertain period, the key lies in how to seize opportunities amidst the chaos and achieve a leap in the investment portfolio. Investors need to remain vigilant while also having the courage to position themselves at the right moment, preparing for the future market recovery.